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    Calculating Cash Freed Up After Inventory Turnover Increase

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    Below is selected data for Gertup Corporation as of 12/31/05:

    Total assets $ 5,500
    Current assets 2,750
    Long-term debt 450
    Current ratio 2.5
    Inventory 1,500
    For year ended 12/31/05
    Sales $18,500
    Cost of goods sold 14,800

    Gertup has maintained the same inventory levels throughout 2005. If end of year inventory turnover was increased to 12 through more efficient relationships with suppliers how much cash would be freed up.

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    Solution Summary

    This solution calculates the cash freed up using the level of inventory required and the current inventory level.